LATAM Airlines Group SA Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Linenberg - Deutsche Bank - Analyst : Okay, good morning, everyone. An impressive set of results here. And by the way, Ramiro congratulations on your promotion.

Question: Michael Linenberg - Deutsche Bank - Analyst : So I guess I have two here. If we can just go back to the $25 million operating impact from Porto Alegre being shut down. That was a bit higher than what I expected. Do we have some of that impact lingering or having an impact on your third quarter results? And when we look at, sort of as a part two to that question, when we look at your performance in domestic Brazil, it was one of your leading geographies. Should we assume that, that type of performance continues into the third quarter or maybe even into the back half of the year?

Question: Michael Linenberg - Deutsche Bank - Analyst : That's great, Roberto. Thanks for the comprehensive answer. Just one quick follow-up here. With the regime change in Argentina, it does look like that there are going to be more opportunities for airlines. We've seen Argentina sign an open skies agreement, I believe, with Canada, with Panama. From your perspective, you have airlines in multiple countries that can do agreements with Argentina. And I'm not saying that it makes sense for LATAM to go into Argentina and maybe set up a domestic operation, but from an interregional basis, can you talk about some of the potential opportunities of being able to just offer a broader service offering tune from Argentina? Thanks for taking my question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, LTM.SN - Q2 2024 LATAM Airlines Group SA Earnings Call

Question: Michael Linenberg - Deutsche Bank - Analyst : Thank you, Roberto.

Question: Guilherme Mendez - JPMorgan - Analyst : Good morning, Roberto, Ramiro and (inaudible) Thanks for taking the question. First of all, I'd like to wish Ramiro good luck on the new role as well. I have two points. The first one is on the competitive environment. Roberto mentioned about Brazil a little bit on the previous question. But just wondering if there's, you see any significant signs of oversupply in any of the markets that LATAM operates. And if you could expect any kind of yield pressure going forward? And the second question is on capital allocation. So strong free cash flow generation in the first half of the year. Likely the outlook should be even better. How should we think about capital allocation going forward to increase dividend payments, buybacks or reduce leverage? Thank you.

Question: Guilherme Mendez - JPMorgan - Analyst : Very clear. Thank you, both. Have a good day.

Question: Gabriel Rezende - Itau BBA - Analyst : Thanks. Good morning. Thanks for taking my question. I would like to make a quick follow-up regarding your forward-looking curve and yields in the report. We saw a slight contraction in this quarter, which was maybe right expected on yields. You posted a 4% lower yields year-on-year. I was just wondering, you mentioned that the forward bookings did not seem to question your guidance. However, we are seeing a relevant depreciation of the BRL here in Brazil. So I was just wondering whether the forward bookings are implying that yields are going up in the second semester versus the second semester of 2023. It would be nice if you could confirm that. And also, Ramiro, I would appreciate if you could comment a little bit on your move to the CCO position. Congrats for that. And what should be your main focus by November when you assume the new role? Thank you.

Question: Gabriel Rezende - Itau BBA - Analyst : Thank you. That's very clear.

Question: Andre Ferreira - Bradesco BBI - Analyst : Hi, good morning. Thank you for taking my questions. I have two points to cover. So the first one is a follow-up on the question on oversupply and yields. But we've been seeing weakness in Europe, in Latin America mainly in international traffic. So I was wondering if you can just give a little bit more detail on the current yield and yields outlook in each international markets and also give a bit more clarity on yields on the domestic markets that you did not cover so far in this call. And my second question is, it has been discussed in the local media that, in the local Brazilian media, that LATAM is evaluating the purchase of smaller jets. If you can comment just on potential size and what routes would they potentially go to if those news are correct? Thank you.

Question: Andre Ferreira - Bradesco BBI - Analyst : Thank you.

Question: Joao Frizo - Goldman Sachs - Analyst : Hey, good morning, everyone. Thanks for taking my questions. Just first of all, congratulations on the releasing of the ADR. So I have two questions on my side. The first one is related to growth beyond 2024. Looking at '25, '26, should we expect to see the same trend you guys published on your guidance for '24, meaning international travel growing more, followed by domestic Spanish speaking countries? And then finally, domestic Brazil on a capacity perspective. Anything you could share on that would be great. And then finally, just a second follow-up on the OEMs, if you could provide an update on the delays, what you're seeing now, how are the conversations? Thank you very much.

Question: Joao Frizo - Goldman Sachs - Analyst : Great. Thank you very much, guys.

Question: Christian Reddy - BNP Paribas - Analyst : Sorry about that? Thank you all for your time and appreciate the really strong results. We're all very happy about that. A few quick questions, just some minor items. One, the Brazilian government has been constantly talking about some sort of funding for the airlines. Has anything materialized on that?

Question: Christian Reddy - BNP Paribas - Analyst : Right. And the form of that is still up in the air, how it would come in, if it would be a grant or anything of that sort, right?

Question: Christian Reddy - BNP Paribas - Analyst : Right. Okay. And then with regards to your liquidity, you're above that 20% magic threshold of your revenue. As you go forward, it looks as though supply and demand is in very good shape. You're adding a lot of capacity. The RASK isn't being impacted in a negative fashion. Is there a certain amount of liquidity at a point in time where you say, it's enough, now we have to do something else with our capital? And if so, what would be somewhere like the highlights or things that you would like to do if you had a wish list? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, LTM.SN - Q2 2024 LATAM Airlines Group SA Earnings Call

Question: Christian Reddy - BNP Paribas - Analyst : Great. And then I guess the last thing, just from, I guess, economic standpoint, in the US markets, we're seeing weakening of fares and the demand. A lot of that's obviously tied to the US consumer. In the markets down in Latin America, how is the economic picture for the consumer and the prospective yields and fares going forward?

Question: Christian Reddy - BNP Paribas - Analyst : Great. Thank you very much for your time. Appreciate it.

Question: Felipe Villanova - Santander - Analyst : Thank you for being here. Well, first of all, congrats, Ramiro, on the new position. I guess it's a bitter sweetness for the market, though. Anyway, so I have a couple of questions. The first one is, when looking at the Spanish speaking countries' unit revenue in local currency, are they also decreasing? Any comment on how these behave in local currency would be very appreciated. My second question is regarding liability management. Do you expect any impact on results because of this for the fourth quarter and by how much? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, LTM.SN - Q2 2024 LATAM Airlines Group SA Earnings Call And my third question is what risk do you see for the second half of the year, if you see any? I'm asking because you already reached the midpoint of your EBITDAR guidance. And the first half of the year is usually the weaker half, but you're still reiterating your guidance. So I'm trying to see if there is, there might be anything that's involved in the, or down to risks in the guidance that I'm not aware of. Thank you very much.

Question: Felipe Villanova - Santander - Analyst : Yes. Sorry, I lost you for a moment. The first question was about how the unit revenue, the RASK of the Spanish speaking countries, are they also decreasing in local currency? Or how are they behaving. It can be as a whole or any color you have would be appreciated though.

Question: Felipe Villanova - Santander - Analyst : Yes. I mean, more than the rating, I was concerned about your guidance because you reiterated your guidance and you already, you have already reached the, if I analyze the results of the first half, I'm reaching the midpoint of the EBITDAR, yet this is the weaker half, so it looks like there's some upside to it, but you're reiterating the guidance. So I just wanted to know if there is some risks involved that I'm not aware of. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, LTM.SN - Q2 2024 LATAM Airlines Group SA Earnings Call

Question: Felipe Villanova - Santander - Analyst : Okay, understood. Perfect. Congrats again, Ramiro, and thanks everyone for the call.

Question: Neil Glynn - AIR Control Tower - Analyst : Oh, good morning, everybody. If I could, first of all, ask your thoughts on the (inaudible), sorry, the Azul discussions. The announcement was obviously made that discussions are ongoing after your first quarter. So do you think any potential combination or deal there may have significant ramifications for competition as you see it? And then a second question on the balance sheet. At the second quarter in noncurrent liabilities, there's $900 million of a provision. This figure, for context, was below $300 million pre-pandemic. So I'm just interested in your thoughts as to how likely that is to result in a cash outflow over the course of the next few years? Thank you.

Question: Neil Glynn - AIR Control Tower - Analyst : Great. Thank you.

Question: Fernanda Recchia - BTG Pactual - Analyst : Hey, guys, good morning. Thank you for taking my question and Ramiro, good luck on your new position. Two points here from our side. First, the government recently announced the launch of Voa Brasil with an initial focus on retirees and pensioners. Just wondering to hear your net reading of this program. Do you see room for improvement of load factor? What is your net reading of it? And then second, could you please provide us if there is any update regarding the Pratt & Whitney compensation? And also, could you clarify if your adjusted EBITDAR is taking into consideration the $25 million of one-off regarding Porto Alegre Airport? That's it from my side. Thank you.

Question: Fernanda Recchia - BTG Pactual - Analyst : And just a follow-up. Actually, my question was, is the adjusted EBITDAR was adjusted for the $25 million or not?

Question: Fernanda Recchia - BTG Pactual - Analyst : Perfect. Thank you, guys, and a good (inaudible)